Question

Which firm has a higher indirect stress cost; an insurance company or a retail company? Why?

Answer 1

When we are considering the indirect stress cost it will be higher for an Insurance company.  An example of a cost of financial stress are bankruptcy costs.These direct costs include auditors fees, legal fees, management fees and other payments. Cost of financial distress can occur even if bankruptcy is avoided. These type of can be avoided by proper cost management. For insurance company the risk factor is higher and the financial leverage is also higher. So the indirect stress cost of insurance company will probably higher.

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